Question

The difference between the 45-degree line and the Lorenz curve shows the:


inflationary gap.


recessionary gap.


number of households that are classified as being poor.


degree of income inequality.

Answer 1

The difference between the 45-degree line and the Lorenz curve shows the **degree of income inequality**. The 45-degree line represents perfect equality where everyone has the same income, while the Lorenz curve represents the actual distribution of income in a population. The area between the two curves reflects the extent of income inequality within that population.